Montini Shipyards builds custom cruise liners. Each job requires a bid. Montini's bidding policy is to estimate the costs of materials, direct labor, and subcontractors' costs. These are totaled and a markup is applied to cover overhead and profit. In the coming year, the com¬

pany believes it will be the successful bidder on 8 jobs with the following total revenues and costs.

The residual will cover overhead and profit.
Required:
1. Given the preceding information, what is the markup percentage on total direct costs?
2. Suppose Montini is asked to bid on a job with estimated direct costs of $1,100,000. What is the bid? If the customer complains that the profit seems pretty high, how might Mon¬
tini counter that accusation?

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Revenue Materials Direct labor Subcontractors Residual $879,750,000 $125,000,000 140,000,000 500,000,000 765,000,000 $114,750,000